Improvements in revenues and earnings in the first half of 2010

03. August 2010

RHI AG, the world market leader for refractory products, continued the upward trend in the first half of 2010 and realised significant improvements in revenues and earning in comparison with the very difficult first half of 2009.

Revenues of the RHI Group in the first half of 2010 rose by 22.5% to EUR 740.7 million compared with the reference period of 2009 (first half 2009: EUR 604.5 million). The operating result increased by 139.2% compared with the first half of 2009, up from EUR 31.1 million to EUR 74.4 million. The balance of the reduction in carrying value and the insurance compensation for the plants destroyed by the earthquake in Chile was reflected in a positive one-off effect of EUR 7.9 million. The pre-restructuring EBIT margin rose from 5.1% to 10.0%. Impairment losses and restructuring expenses amounted to EUR -4.1 million in the first half of 2010. The Group’s EBIT thus equalled EUR 70.3 million (first half 2009: EUR 21.4 million). In comparison with the first quarter of 2010, the second quarter of 2010 also showed a positive development. Revenues were up 16.5% on the previous quarter, and the quarterly EBIT was increased from EUR 31.7 million to EUR 38.6 million.

As of 2 July 2010 the equity ratio increased to 22.3% versus 20.0% as of 31 March 2010. Compared with the half-year balance sheet date of the previous year, equity rose by 59.5% from EUR 196.7 million to EUR 313.8 million; net debt declined by 24.0% from EUR 308.4 million in the reference period to EUR 234.4 million.

1st Half
in € million 2010 20091) Change
Revenues 740.7 604.5 22.5%
Operating result2) 74.4 31.1 139.2%
Operating result margin2) 10.0% 5.1% 4.9ppts
EBIT 70.3 21.4 228.5%
EBIT margin 9.5% 3.5% 6.0ppts
Profit before income taxes 61.7 3.1 1,890.3%
Profit after income taxes 49.1 2.3 2,034.8%
Net cash flow from operating activities 16.2 90.3 (82.1)%
Capital expenditure 14.5 15.1 (4.0)%
Employees at half-year 7.258 7.062 2.8%

1) after reclassification

2) before impairment losses and restructuring expenses

Steel Division World steel output in the first half of 2010 increased by roughly 28% compared with the first half of 2009, not including China even by some 34%. Revenues of the Steel Division improved significantly from EUR 318.4 million to EUR 466.2 million; the operating result was raised from EUR -9.7 million to EUR 30.9 million. In the second quarter, RHI increase revenues by 61.6% in comparison with the same period of the previous year. The growth of RHI thus again exceeded the growth rate of steel production. The operating result of the second quarter, at EUR 14.8 million, was clearly positive after it had still been negative at EUR -2.9 million in the second quarter of 2009.

Industrial Division In the second quarter of 2010 business in the most important customer industries of the Industrial Division started to recover slightly. However, a genuine upswing, in the global construction industry in particular, is not yet in sight. Revenues of the Industrial Division, at EUR 262.1 million in the first half of 2010, still fell slightly short of the figure of the first half of 2009 (EUR 275.4 million), which was still affected by the good order situation of the year 2008. The operating result increased from EUR 33.0 million in the first half of 2009 to EUR 39.2 million in the first half of 2010, which corresponded to a pre-restructuring EBIT margin of 15.0% (first half of 2009: 12.0%). The improvement of the pre-restructuring EBIT margin in the second quarter of 2010 to 16.4% (second quarter of 2009: 10.4%) was primarily attributable to the one-off effect of an insurance payment resulting from the earthquake in Chile.

Raw Materials Division Revenues of the Raw Materials Division improved from EUR 63.5 million to EUR 77.7 million in the first half of 2010, up 22.4% on the comparative period in 2009. This was caused by significantly higher demand by the Steel and Industrial Divisions. In comparison with the first half of 2009, capacity utilisation was 32.4% higher. The operating result amounted to EUR 4.3 million in the first half of 2010 (first half 2009: EUR 7.8 million), with a landslide at the Eskisehir plant in Turkey due to bad weather creating costs of EUR 1.5 million.

Outlook RHI expects a sustained recovery of the global economy in the second half of the year, which will again be driven by growth in the emerging markets. A potential slow-down of the growth momentum should not counteract the overall trend. Uncertainties may result from changes in the structure of raw material prices.

The order status of the Steel Division for the third quarter of 2010 indicates a business development comparable to the two previous quarters, though moderately weaker due to seasonal factors. In comparison with the first half of 2010, RHI expects global steel output to decline slightly in the second half of the year 2010. In addition, the increased raw material costs will cause pressure on margins and make significant price adjustments necessary in the coming quarters.

In the Industrial Division RHI considers the market development positive and expects revenues in the second half to slightly exceed the figures of the first half, which will be primarily attributable to a good fourth quarter.

The development of the Raw Materials Division will depend on the further economic development, especially in the steel industry.

Overall, RHI expects revenues in the second half of the year to reach the level of the first half. Higher raw material prices and the delayed price adjustments give reason to expect an EBIT margin in the third quarter 2010 of 50-150 base points below that of the first half of the year.